As the ABA Journal reports, the U.S. District Court for the Southern District of New York has dismissed a complaint brought by law firm Jacoby & Myers challenging Rule 5.4’s ban on nonlawyer partnership & outside investment in law firms. This follows a remand from the Second Circuit. Lawyers for the plaintiffs have said they plan to appeal the decision to the Second Circuit. The suit, which raises 1st and 14th Amendment arguments, cited ideas discussed by casebook author Renee Knake.
Outside investment in law firms, which is sometimes referred to as alternative business structures or ABS, is available in England and Wales and Australia (and is under consideration in parts of Canada) but remains controversial. For example, the ABA Commission on Ethics 20/20 circulated a discussion paper on the topic, but in the face of negative reaction announced that it would not consider the issue further. (See here for my article on the work of the Ethics 20/20 Commission).